Input cost pressures high, but better volumes likely in Q4: JSW Steel CEO

The recent rise in prices of iron ore and coking coal will lead to some cost pressures in the current quarter for JSW Steel, but higher volumes sequentially and firm global steel prices should help the company offset some of this pressure, its chief executive officer Jayant Acharya said. The country’s largest producer of steel posted a five-fold surge in its consolidated net profit for the December quarter year on year, aided by volume growth in India and stronger performance of its international subsidiaries. While the company has trimmed its capital expenditure guidance for FY24 by Rs 2,000 crore, or 10%, this will not impact its expansion plans, Acharya told ET in an interview. Edited excerpts:

What is your assessment of the third quarter?

Quarter 3 has been strong in terms of production overall, with consolidated production of 6.87 million tonnes at an all-time high. In the US, overall demand was better and prices are improving, and we see this momentum continuing in the current quarter. We also saw an improved performance in Italy, and we see the traction in the rail business continuing there.What is the outlook for Indian operations in Q4 given the rising raw material costs?
There is cost pressure as raw material costs remain elevated, but we are expecting better volumes during the quarter. Our coking coal will move up by $20-25 per tonne as a blend. The recovery seen in prices globally, though, has brought local prices closer to parity, and this has led to better traction in exports as well. With January-March being a seasonally strong quarter, and the impact of strong international prices rubbing off in India, we should be able to offset some of these cost pressures.

Do you see any impact on pricing from China’s move to support its real estate sector?
The targeted stimulus should hopefully improve the domestic consumption in the country which was weaker, and could help moderate the exports emanating out of China.

Will the reduction in FY24 capex by Rs 2,000 crore to Rs 18,000 crore impact your target of 50 million tonnes capacity by 2030?
No, it will not. There is some timing issue because of which some part of the planned capex for Q4 will go into the subsequent quarter, but that is from a basic cash outflow point of view. We have already spent Rs 13,250 crore on capex this year, and are on track to reach 50 million tonnes by the end of this decade.Q3 has also seen an increase in your debt levels, by around ‘10,000 crore. Your comment?
That is primarily because of an increase in our working capital. With higher volumes in the next quarter and some liquidation in inventories, we expect better cash flows, which will free up some of the working capital we have built up. I believe the debt levels have peaked for now.

Any debt refinancing plans for FY25?
We have been able to maintain and do well on our weighted average interest cost which was at 7.3% in Q3 and 7.27% in Q2. With interest rates likely to moderate, we will look at opportunities to refinance debt, both international and domestic, on a more cost-effective basis.